What Do Investment Bankers Do?

Since M&A is the main product in investment banking, I will provide an answer in relation to this. Investment bankers originate, mandate/target match, and structure M&A deals. After establishing one’s coverage and then building an index for the vertical and sub-vertical as well as establishing relationships with strategic and financial buyers within the vertical and sub-vertical, the investment banker advises targets on their strategic alternatives using information gleaned from the vertical and sub-vertical indices. Regarding the vertical index and sub-vertical index, the investment banker ultimately tracks trends in:

Growth rates

Margins

Debt to Equity

Multiples

The investment banker takes the index and establishes tiers which turn into peer groups. This is why we pull public comps; to benchmark a target against the comps. By comparing a target’s level of performance to it’s peers and the industry in general the investment banker determines when it is ideal to exit the business (when multiples are strong) and when it is not (when multiples are weak). He/she then advises the target on the appropriate transaction and executes it once target management/ownership agrees.